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What All Employers Should Know About Recent Exempt Outside Salespeople

Posted on Nov 28, 2012

A recent 5-to-4 Supreme Court decision in Christopher v. SmithKline Beecham Corp. ruled that pharmaceutical representatives are subject to the “outside sales” exemption to the overtime requirements of the Fair Labor Standards Act. This means pharmaceutical sales employees are exempt outside salespeople and do not qualify for overtime pay.

The lawsuit first focused on whether pharmaceutical reps actually are involved in sales. Arguments were made claiming that pharmaceutical industry reps do not actually sell a product to doctors, but rather persuade doctors to make non-binding commitments to the rep’s pharmaceutical company. The U.S. Department of Labor (DOL) argued that this description did not meet their interpretation for “sale,” which is a transfer of title to a customer. However, the Court rejected the DOL’s interpretation.

Both sides were argued and the majority essentially said that jobs of this nature have existed since the 1950’s; adopting a new standard now would not give drug companies fair warning. Also, employers feel they have been treating the reps fairly because there has never been any enforcement action on this issue before. Furthermore, if this allowance was granted, other employees may interpret regulations where they see fit.

What All Employers Should Learn from This Case

This case is significant, and most employers should be pleased with the outcome. This decision was important to remind business owners that not every administrative decision will be supported by the courts. Because no employer wants to be scrutinized by federal agencies for their policies, employers should ensure they are in compliance by discussing their policies, procedures, pay, benefits, and other human resource planning with experienced Texas general counsel services.